Launching Your Startup: A Guide to Funding Options and SBA Loans

February 3, 2025

Launching Your Startup: A Guide to Funding Options and SBA Loans

Launching Your Startup: A Guide to Funding Options and SBA Loans 


Starting a business is an exciting journey, but securing the necessary funding to keep your momentum going can be stressful. While the U.S. Small Business Administration (SBA) offers several loan options for established companies, there are also funding solutions tailored for new ventures. This guide will walk you through SBA funding options for startups, how to apply, and the eligibility requirements. We’ll also explore alternative funding options if SBA loans aren’t the right fit for your business. 



SBA Loans for New Startups

While there’s no specific “SBA startup loan,” two programs are particularly well-suited for newer businesses: the **SBA Microloan** and the **SBA Community Advantage Program**. Each has unique terms, eligibility requirements, and benefits designed to help brand-new businesses get off the ground. 



SBA Microloan

The SBA Microloan program allows startups to borrow up to $50,000, with the average loan size being around $13,000. The maximum loan term is seven years, making it an accessible option for early-stage businesses with less stringent eligibility requirements compared to traditional loans. 


- Ideal for:  Managing a new business and covering working capital needs. 

- Can be used for: Working capital, inventory, supplies, equipment, furniture, or fixtures. 

- Cannot be used for: Paying existing debt, settling lawsuits, purchasing real estate, or covering fines/penalties. 

- Eligible businesses: For-profit small businesses or nonprofit childcare centers. 

- Application process: Apply through an SBA-approved lender. Collateral and a personal guarantee are typically required. 



SBA Community Advantage Program

This program is designed to support entrepreneurs in underserved markets, offering loans of up to $350,000 with a repayment term of up to 10 years. Originally a pilot program, it has now become a permanent part of the SBA 7(a) loan program, providing long-term support for new businesses in low-to-moderate-income communities. 


- Ideal for: New businesses (less than two years old) in underserved communities. 

- Can be used for: Commercial real estate, leasehold improvements, inventory, equipment, working capital, or debt refinancing. 

- Cannot be used for: Illegal activities, investment real estate, or personal expenses. 

- Eligibility requirements: Businesses must operate in underserved markets, such as: 

 - Low-to-moderate-income (LMI) communities 

 - Rural areas, Opportunity Zones, or Historically Underutilized Business Zones (HUBZones) 

 - Veteran-owned businesses or those with a majority low-income workforce 



SBA Loans for Established Startups

Once your startup has been operating for two years, you gain access to additional SBA loan options, including the SBA 7(a) Loan and the SBA 504 Loan. 



SBA 7(a) Loan

The SBA 7(a) loan is one of the most versatile funding options, with a maximum loan amount of $5 million. Loans over $25,000 require collateral, and repayment terms vary based on the loan’s purpose, typically up to 10 years. 


- Ideal for: Businesses in the growth stage. 

- Can be used for: Working capital, equipment, real estate, debt refinancing, or ownership changes. 

- Cannot be used for: Illegal activities, investment real estate, or personal expenses. 

- Eligibility requirements: For-profit businesses operating in the U.S. with demonstrated repayment ability. 



SBA 504 Loan

The SBA 504 loan is designed for long-term investments, offering up to $5 million for major fixed assets like real estate, equipment, or machinery. Repayment terms are 10 or 20 years, depending on the asset. 


- Ideal for: Purchasing or upgrading major fixed assets. 

- Can be used for: Real estate, land, equipment, machinery, or utility improvements. 

- Cannot be used for: Working capital or inventory. 

- Eligibility requirements: Strong credit history, financial stability, and multiple years in business. 



How to Get an SBA Loan for Startups 

Securing an SBA loan requires preparation and planning. Follow these steps to improve your chances of approval: 


1. Calculate Your Startup Costs: Determine how much funding you need by accounting for one-time expenses (e.g., permits, equipment) and recurring costs (e.g., payroll, rent). 

2. Write a Business Plan: Include market research, financial projections, and startup costs to demonstrate your business’s potential. 

3. Review SBA Loan Requirements: Ensure your business meets the SBA’s eligibility criteria, including being a for-profit entity operating in the U.S. 

4. Choose a Loan and Lender: Use the SBA’s Lender Match tool or platforms like Lendio to find the best lender for your needs. 

5. Prepare Your Application: Gather necessary documents, such as tax returns, financial statements, and SBA forms (e.g., Form 1919, Form 413). 



Alternative Funding Options

If SBA loans aren’t the right fit for your startup, consider these alternatives: 


- Online Business Loans: Fast, flexible funding options with quick approval times. 

- Small-Business Grants: Free capital that doesn’t require repayment, though the application process can be competitive. 

- Business Credit Cards: A great way to manage everyday expenses while building your business credit score. 




Find the Right Funding for Your Startup 

Whether you’re exploring SBA loans or alternative funding options, Lendio can help you compare offers from multiple lenders. Our free application process takes just 15 minutes and won’t impact your credit score. Apply now to find the funding solution that empowers your startup’s success! 

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How to Get a Business Loan: A Founder’s Guide to Funding Securing funding is a critical step for many entrepreneurs looking to start or grow their businesses. Whether you’re launching a new venture or expanding an existing one, understanding how to get a business loan can make all the difference. In this guide, we’ll walk you through the steps to secure the funding you need to achieve your business goals—and why applying with Founder Funding can be a smart choice for your business funding and capital needs. 1. Determine Your Funding Needs Before applying for a business loan, it’s essential to know exactly how much funding you require and what you’ll use it for. Common reasons for seeking a business loan include: Starting a new business Purchasing inventory or equipment Expanding operations Hiring additional staff Covering cash flow gaps Having a clear purpose for the loan will not only help you determine the amount you need but also demonstrate to lenders that you have a solid plan in place. 2. Understand Your Loan Options There are several types of business loans available, each designed to meet different needs. Some of the most common options include: Term Loans: A lump sum of money repaid over a set period with interest. Ideal for large, one-time expenses. SBA Loans: Government-backed loans with favorable terms, often used for startups or small businesses. Business Lines of Credit: Flexible funding that allows you to draw funds as needed, perfect for managing cash flow. Equipment Financing: Loans specifically for purchasing business equipment, with the equipment itself serving as collateral. Invoice Financing: Advances on outstanding invoices to improve cash flow. Research each option to determine which one aligns best with your business needs. If you’re unsure where to start, Founder Funding can help you explore the best financing solutions tailored to your business. 3. Check Your Credit Score Your personal and business credit scores play a significant role in the loan approval process. Lenders use these scores to assess your creditworthiness and determine the terms of your loan. Before applying, review your credit reports and address any errors or issues that could negatively impact your score. If your credit score is lower than desired, consider taking steps to improve it before applying for a loan. 4. Prepare Your Documentation Lenders will require specific documents to evaluate your loan application. Common requirements include: Business plan Financial statements (profit and loss, balance sheet, cash flow) Tax returns (personal and business) Bank statements Legal documents (business licenses, articles of incorporation) Having these documents ready in advance can streamline the application process and improve your chances of approval. Founder Funding can guide you through the documentation process to ensure your application is complete and compelling. 5. Compare Lenders Not all lenders are created equal. Take the time to compare offers from banks, credit unions, and online lenders. Consider factors such as interest rates, repayment terms, fees, and customer reviews. By shopping around, you can find a lender that offers the best terms for your business. Alternatively, you can simplify the process by applying with Founder Funding, which connects you with a network of trusted lenders tailored to your business needs. 6. 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